Auto dealers report soft sales after tax hike

WEST COVINA - A hike in the state's sales tax may have resulted in weakened auto sales on many lots since the levy took effect April 1, and dealers now worry that increased vehicle license fees could sour sales even more.

Whether or not soft sales are linked to the increased tax increase remains unclear. But the added cost to consumers certainly hasn't helped local dealers in recent days.

Many dealers now say the sales tax increase, though troublesome, didn't have the impact that the increase in the vehicle license fee will have. Those fees are expected to more than double on May 15.

About the only remaining hope for dealers are manufacturers' incentives designed to soften the blow of increased taxes and fees.

Hyundai is continuing its buy-back deal. The promotion applies to buyers who lose their job in the first year after purchase. For those who qualify, the company will buy the car back.

And GM and Ford have announced programs in which the companies would cover several months of payments in the case of a customer's job loss.

That despite the fact that GM appears on the brink of bankruptcy.

But Steves was confident major brands will survive.

"GM's fine...they are very confident," Steves said. "Even if it does go into bankruptcy, it is going to be a reorganization. Chevrolet, Cadillac and GMC are going to come out on top anyway."

Dealers also hope that sales will spike in the weeks before the increased fee takes effect. A similar spike occurred before the April 1 sales take hike.

"We definitely saw a surge in business, a lot of people were coming in before the increase," said Anthony Iannone, general manager of Ed Butts Ford in La Puente. "But it's going to be hard to tell until the end of the month (if a post-tax slow down) is really part of the sales cycle."

Many dealers promoted lower taxes as a way to attract buyers. In those promotions, auto lots - already reeling from the weak economy - ratcheted up advertising, pushing deals as the last chance for customers to avoid paying sales tax on cars.